27
FORTUNE.COM // JANUARY 2020
the companies copied each other all over
the place, so people were only competing on
prices and availability,” Chen says. Therefore,
investor-fueled attempts to expand and snap
up as much of the market as possible became
the presumed path toward success.
“Investors drove [bike-sharing startups] to
grow faster and quicker than their competi-
tors, to move to more cities and places, to
lay out more bikes without even calculating
breakeven points,” Chen says.
In late 2018, after the startups had burned
through billions of dollars, it became clear that
even the top companies didn’t have a path to
profitability. In July, a court found that Ofo
couldn’t pay its debts, and the company still re-
fuses to refund $15 deposits to up to 15 million
customers. (A recent Ofo refund scheme prom-
ises customers their deposits if they purchase
over $200 worth of other products.)
Mobike was purchased by food-delivery
giant Meituan Dianping, which prized the
startup more for its data than its operations,
which it promptly scaled back. And at least
five other competitors went bankrupt, a string
of failures that likely means rusting bikes will
become only more of a nuisance.
might be the A.I. cycle of
tomorrow. Bork says that while
it has gotten more difficult
to raise funds in the sharing
economy, easy funding patterns
are simply switching to new,
“hot” technologies like artificial
intelligence.
In 2018, A.I. investments in
China rose 54%, to $7.4 billion,
according to ABI Research.
And in the 2019 edition of the
Hurun Global Unicorn List,
an annual international report
that tracks startups worth more
than $1 billion, China boasts 15
unicorns in the A.I. sector alone.
Onetime unicorns Mobike and
Ofo, on the other hand, are now
worth a fraction of what they
once were, and Hellobike is the
sole bike-sharing unicorn on
Hurun’s list.
“For businesses in China that
manage to package their business
model with these new hot issues,
you are seeing the same thing,”
says Bork. “And I don’t see so far
that this stops. The big gamble
here in China is still on.”
“This year and the year after, you will only see more and more
garbage bikes being laid on the street at a great social cost,” Chen
says. “The companies don’t have money to clean it up, so it almost
becomes a societal burden. Who’s going to take care of all this steel
and metal?”
Still, amid the doom and gloom, there may be some hope that
bike sharing can work. Recently, a bike-sharing latecomer called
Hellobike found success in building a customer base in smaller cit-
ies and with fewer bikes, with plans to expand into electric scooters.
THE SAME FATE FOR A.I. FIRMS?
ALL OF THE TURBULENCE in the bike-sharing sector seems to have
cooled off funding and expectations for China’s once skyrocket-
ing sharing economy. And China is not the only country in which
sharing-economy firms are struggling to make the model profit-
able, as shown by the travails of firms like WeWork and Uber.
Brock Silvers, managing director of the Shanghai private
equity firm Kaiyuan Capital, believes that most of the responsi-
bility should fall on investors, who will likely now take a more
restrained approach. “The tech sector’s lessons aren’t the true
issue. No one can blame companies for accepting wild invest-
ments. The reality is that the pathways to exit have become more
difficult,” Silvers says. “This will temper [venture capital and pri-
vate equity] investors, which in turn should enforce a more sober
outlook upon China’s tech firms and entrepreneurs.”
Still, there are signs that the bike boom and bust of yesterday
company number of bikes mone y r aised prominent investors what happened
Ofo 10 million–plus $2.2 billion
over nine
rounds
Ant Financial,
Didi Chuxing
Deep in debt; cannot
give refunds to custom-
ers; laid off thousands
of staff
Mobike 7 million–plus $900 million Tencent, Foxconn,
Hillhouse Capital,
Warburg Pincus
Purchased by Meituan
Dianping for $2.7 billion,
but then scaled back
international operations
Bluegogo 700,000 $90 million Black Hole Capital Deeply in debt by
November 2017; taken
over by Didi Chuxing in
January 2018
Hellobike 5 million–
7 million
$1.8 billion GGV Capital,
Grains Valley VC,
Joy Capital,
Ant Financial
Cautiously expanded
from China’s lower-tier
cities, becoming a leader
in e-bikes; plans to
become a ride-hailing
platform
Xiaoming
Bike
430,000 $15 million
in second
round
NewMargin Ven-
tures, Cronus Bike
Filed for bankruptcy;
cannot pay back over
$100 million in deposits
Kuqi
(Coolqi)
1.4 million $130 million Private Filed for bankruptcy in
2017
TWO-WHEELED ROCKETSHIPS THAT FELL TO EARTH
China’s bike-sharing startups quickly raised billions from prestigious Chinese and
Western investors. They used that money mostly to drive one another out of business.
KE VIN FR AYER
—GETTY IM
AGES
